Harry & David makes big quarterly gains

Tuesday

Feb 14, 2012 at 12:10 AMFeb 14, 2012 at 3:10 AM

Harry & David Holdings regained its footing during the first Christmas sales season after coming out of bankruptcy, with a big boost in profitability. The Medford-based gift and gourmet retailer said it earned $34.75 million in its fiscal second quarter, a 151 percent improvement over the disastrous 2010 holiday period that led the company to seek Chapter 11 protection a year ago. The majority of the company's revenue and profit were recorded during the quarter, and a $13.82 million profit in the quarter a year ago wasn't enough to pay the bills.

By GREG STILES

Harry & David Holdings regained its footing during the first Christmas sales season after coming out of bankruptcy, with a big boost in profitability. The Medford-based gift and gourmet retailer said it earned $34.75 million in its fiscal second quarter, a 151 percent improvement over the disastrous 2010 holiday period that led the company to seek Chapter 11 protection a year ago. The majority of the company's revenue and profit were recorded during the quarter, and a $13.82 million profit in the quarter a year ago wasn't enough to pay the bills.

Company executives were confident in the quarter's outcome but see the results as the first of many anticipated successes.

"We've got a lot of high aspirations," said Chief Executive Officer Craig Johnson, who assumed his leadership post shortly after the company emerged from reorganization. "We've set the bar, but we've got a long ways to go. When you emerge from bankruptcy, your thoughts are about more than just the first season. I'm looking down the road three or four years and want to continue to grow and develop the company. We're very excited, and this is our benchmark position."

While earnings were up, revenue declined during the period, primarily because Harry & David closed nearly half of its 122 retail stores in shopping malls across the country. But the 67 shops that remained in business performed well.

For the 13-week period ending Dec. 31, revenue declined 6.3 percent to $245.4 million compared with $262.1 million a year earlier.

The company's gross profit, which equals net sales less the cost of goods sold, jumped 14.9 percent to $119.6 million in the second quarter compared with $104.2 million the year before.

Its pre-tax earnings were $55.3 million, up from $20.6 million.

"We had a solid performance this holiday season from our entire sales, marketing, merchandising and operational teams, exceeding our established metrics and performance goals in sales support, fulfillment and customer service," Johnson said. "Everybody executed and I'm proud of the whole group."

Johnson said there were no surprises after the numbers were crunched and there's plenty of momentum heading into the calendar year.

"When you're on the inside living and breathing it, you kind of know what's going on," he said. "Our inventory levels were in line with expected targets and we had a much lower excess and obsolete inventory position."

Harry & David reported a 3 percent, or $6.4 million, improvement from online sales because of larger average orders, despite fewer visits to its website.

While Harry & David store sales were $20.1 million lower, down 36 percent, than the previous year — same store sales grew 2.1 percent.

In a sign of its improved position, the company had $71.4 million cash on hand after the holidays, compared with $9 million a year ago.

Johnson planned to have a meeting with company employees today, as well as a conference call with investors, to discuss the results.